Ladies and gentlemen, good day and welcome to Relaxo Footwears Limited Q4 FY 2023 earnings conference call hosted by Elara Securities Private Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Prerna Jhunjhunwala from Elara Securities Private Limited. Thank you and over to you. Good evening, everyone. On behalf of Elara Securities India Private Limited, I would like to welcome you all to 4Q and full year FY 2023 post-result conference call of Relaxo Footwears Limited. Today, we have with us the senior management of the company, including Mr. Ramesh Kumar Dua, the Managing Director, Mr. Gaurav Dua, Whole-time Director, Mr. Ritesh Dua, Executive Vice President, Finance, Mr. Sushil Batra, Chief Financial Officer, and Mr. Ankit Jain, Company Secretary. Without taking any further time, I would now like to hand over the call to Mr. Sushil Batra. Over to you, sir. Thank you. Thank you, Prerna. Good afternoon, ladies and gentlemen. Thank you for joining us on this earnings call for the quarter and fiscal year ended March 31st, 2023. The earnings press release and the investor presentation have been uploaded on the stock exchanges as well as at our website, we hope you have had the chance to go through these. Before we begin the question and answer, I will quickly go through the Q4 and FY 2023 performance, starting with Q4. In Q4 FY 2023, we recorded a revenue of INR 765 crore as against INR 698 crore in Q4 FY 2022, recording a growth of 10% year-on-year. On a Q-on-Q basis, the revenue increased by 10%. This is mainly due to volume growth across all categories. Our Q4 FY 2023 EBITDA was at INR 118 crore, up by 6% year-on-year from INR 111 crore in the corresponding quarter of previous years. The EBITDA margins were at 15.4% in Q4 FY 2023 as against 15.9% in the corresponding quarter. On a Q-on-Q basis, the EBITDA margins have grown substantially by 481 basis points due to selling of low cost inventory along with cost free old inventory. PAT was at INR 63 crore. On a sequential basis, PAT grew by 110% from INR 30 crore in Q3 FY 2023. PAT margin for Q4 FY 2023 was 8.3%. Our price correction efforts during the last quarter have resulted a good momentum, we have continued our market share recovery in all major segments during this quarter without relying much on discount and offers. Moving on to full year FY 2023. Despite the challenging environment last year, our strong team responded effectively, our commitment to maintaining our high standard of excellence have made us successful. Revenue for FY 2023 was at INR 2,783 crore, up by 5% year-on-year from INR 2,653 crore in FY 2022. EBITDA was at INR 313 36 crore as against INR 416 crore in FY 2022. EBITDA margin was at 12.1% as against 15.7% in FY 2022. Margins were affected primarily by the high pressure on raw material prices during most of the year. PAT was at INR 150 crore in FY 2023. We are now a debt-free company with robust cash flow operation due to our strong working capital management. During the year, the company incurred a CapEx of INR 174 crores. With the stabilization of raw material prices in Q4, we are currently experiencing strong demand and hold an optimistic view of the future. Our company is strategically positioned to take advantage of the opportunities within the industry, allowing us to further expand our market share. Our key strengths lie in our in-house manufacturing capability, quality of our product, and the strong recall of our brand. We remain dedicated to upholding this strength and will persistently strive to maintain their integrity. We are confident that our continued efforts will yield positive outcome for us in the times ahead. Thank you. Now we can open the floor for questions. Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Aliasgar Shakir from Motilal Oswal. Yeah, thanks for the opportunity, sir, and congratulations to finally seeing a good market share trend, you know, in your company. I have three questions. First is on the, you know, current quarter. You know, I understand from our channel checks that, you know, post the cleanup of the old inventory, market demand has picked up quite strongly, and in fact, Relaxo has not been able to, you know, meet all the distributor demand. Is this true in multiple geographies, and do you think we would have lost any revenue because of that factor, if you could just quantify, you know, what could have been the impact of that in this quarter. Has that been now subsided or we are still seeing the, you know, demand not being able to fully met? Yeah. This is Gaurav Dua. What you said is partly correct, that there is a upsurge in demand, and we are seeing it. 1 reason is that we have corrected the prices. 2nd, this is a peak season for us for open footwear. We are 75% open and 25% closed, this is the open footwear starting from January to June to July. Regarding the shortages we are managing, we have inventory with us, the uptake we are seeing across India for the open footwear. Got it. Can you quantify if you would have lost any revenue because of that in this quarter, and has that been now subsided? It happened in February because there were some IT issues which has been corrected, and now we are able to cover. We have the inventory, sufficient inventory. Okay. Got it. Second question is on your margins? While, you know, we have significantly reduced prices, we have seen impact on margins. Can you share, you know, I mean, what is the trend we should expect in the coming quarters, as raw material prices are also softening? Should we see that helping us and therefore the margin that we saw in this quarter should, you know, improve? How should we see that? I'm Ramesh Kumar Dua. You know, market remains challenging, and we have to be very cautious with respect to our pricing of our article so that we always have a good market share as I said are concerned. The EBITDA margin that you are seeing in this quarter is likely to continue, and there is likely to be some improvement also. Got it. Thank you, sir. This is very helpful. On the gross margin also, should we see improvement because of the raw material price softening? Some improvement, yes. Understood. Just last question on the closed footwear in the sportswear category. I understand that we have made a lot of changes in our design team, online team. If you could share some, you know, thoughts in terms of, you know, what is the strategy in the sportswear, in terms of the new product development, and, you know, what is the aim in the next three, four years, can we expect to, you know, reach about INR 1,000 crores in three, four years time? I mean, if you can just share what is the strategy there. If you talk about Sparx sports shoes, we have grown heavily. We have done roughly around 25% growth. Before that, last year we put up a plant to cater to this need. Still, the plant capacity still we have. It'll take two to three years to, you know, reach to that level. You're talking about INR 1,000 crore. Sparx is already INR 1,000-plus crore brand. Yeah, sportswear would be relatively lower or, I mean, of course, Sparx is much bigger, but within that sportswear, if you could just quantify how much would that be. That is roughly around, we do sports shoe and all sports category, roughly around INR 400 crore. Definitely we have aspiration to become INR 1,000 crore in the. It will take two years, three years. Time will tell. Understood. This is very helpful, sir. Thank you so much. Thank you. Next question comes from the line of Vikas Jain from Equirus. Please go ahead. Thank you, sir. Thank you so much for the opportunity. For the first question, definitely, we have seen a market share, which we have regained from which were lost to earlier competitors. At this point of time, can we easily say that we have regained almost all of the market share or some part of it is still left? Can you repeat the question? It's not so clear. I was mentioning about the market share. Have you like regained the entire market share and reached to what we were at the COVID times or, probably some part of it is still more or less to gain? Yes, definitely what we have lost market share in last quarter one or quarter two last year, we are seeing a good momentum now, and we are gaining the market share back. Definitely we will recover. We have recovered. Now we'll recover more. Sure. Sure. Okay. Sir, second question with respect to the demand, where Ramesh sir did mention that the demand environment continues to remain challenging. Probably, is it like the, how would you, some comments with respect to how is the underlying market, growing and what do you think, it will take for the market to normalize, in what, time period, according to your estimates? Actually what we are hearing from the market there, that this Eid and this festive, there is a demand contraction happening in some parts of India, you know. Rural India is still not able to cover up what it was contributing. I think this is a temporary phenomenon. The inflation is now getting controlled, and we'll definitely see the uptake in coming quarters. Understood. Sir, with respect to last, again, I'll be like, with respect to penetration in South India, How can you broadly break our revenues across on a geographic basis? What is the contribution from the all four north, west, east and south regions? north contribute maximum to around 44%, followed by east, 22, 20 is west, and 15% is south. We are maintaining this, from last year, it is similar. Sure. With respect to more distributors adding in the south, is that on time? Or, how many have you added this year probably? See, it's not great achievement in adding more distributors. We have maintained what we were having. Always there will be a churn, new addition, and you know, some people leaving. It's roughly around same. Okay. Okay, sir. Thank you so much for the update. Thank you. Next question comes from the line of Kaustubh Pawaskar from Sharekhan by BNP Paribas. Please go ahead. Good afternoon, sir. Thanks for giving the opportunity. My question is on the price cut what we have taken. We have taken the price cut to reduce the pricing gap between the lower, you know, the products which are on our end, lower price point products. But since you said that raw material prices have all corrected, have we seen any price reduction take, you know, undertaken by those, you know, bottom of tier level players or lower price point players in the market? Because of which, again, the pricing difference what you were planning to reduce, it has again gone up. Any sense on that? No, you know, now our prices are very competitive, and there is no room for further price cut. You may have competition while we are very competitive. There is no issue. I don't think there's any room competition can do much about it. Okay. You don't see any further price cuts happening in the market, right? No, no. Not so. Okay. Okay. As for my second question, you have been consistent, consistently been talking about expanding your capacities also. Any guidance for, you know, CapEx going ahead and, you know, where you're planning to add capacity? No. Last year, whatever capacity we wanted to expand, that has been expanded. Okay. There is no going to be any expansion then? This year only money is going on molds, which are regular kinds of things, some repairs, molds and backward integration, some capital asset generation, that's it. Okay. Any thoughts on your retail expansion front? by FY 2023, how much was your reach and where you want to take it over the next 2 years? Earlier we were maintaining around 400. We are expanding this year. Can you provide some numbers on that? No. Earlier we are having 400 outlets. Now we are planning to have 465 this year. 65 more addition. Okay. Okay. Okay. Fine. Fine. Thank you. Next question comes from the line of Omkar Ghugadre from Shree investments. Please go ahead. Yeah, my question was regarding, it's from your investor presentation. From FY 2021 to FY 2023, the average realization has gone up and but the number of pairs sold has decreased. In this quarter, the average realization has gone down significantly, but number of pairs sold has increased dramatically. Like, what's the management's view on this going forward? What could be the average cost of pair or like how it is supposed to be in the future? You know, last year we had done major correction in some of our categories like Hawai, EVA. That was the reason that now average selling price has gone down. Our volume has gone up, that is why volume is going up, but the average rate has gone down only because reduction in prices. From here on, what we can expect? A stabilization here, or like, Stabilization. Why not stabilization? Okay. You don't see any upside from here on? You know, on the whole year side because, in this quarter, mostly open footwear, was on demand. You know, closed footwear comes in winter fashion. Overall in the year, again, you will see our last year average price of INR 160 will be back. Okay. For the, for the current finance year, you are expecting around INR 160 per pair realization? Could be little high also depending upon the shoe season. If it is little better than things will be further, but around INR 160, INR 165 we can expect average. Okay. What about the number of pairs? I mean, what could be the ballpark estimate for that? Definitely from the last year we are expecting double digit growth in volume for this year. Okay. Around double digit volume growth and, around similar kind of average realization per pair or somewhat higher? Yeah. Okay. As far as the ROE and ROC is concerned, what's your plan on next two, three years since it has come down dramatically again from FY 2021 to FY 2023? Definitely it will improve in coming years, yeah, because last year was a tough year. Profits were under pressure and we did CapEx also. Next year, definitely it will be much better than this FY 2023. We can, I think, compare it with FY 2022, it did well. Yeah, because it has now come down to a single digit now. That's what I'm asking? Definitely it should be, it should be at least between 15%-20%. That is the intent. If things are well, definitely we'll achieve that. As far as the demand outlook is concerned, how are you seeing currently it is shaping up? Currently there is a little challenge in the market. There is little demand contraction. I think, going forward, quarter two, quarter three onwards will be better. Okay. In the current quarter you are facing some demand issues. Yeah, because what we are seeing, what we're hearing from the market that still rural is not back on track. It's going to take little time. Okay. Can you update on what could be the export percentage and how? Is there any opportunity for Relaxo or like the home market is so large that not even bothered to think about or bothered to think about the export market? I'm attached to what you said. At fourth we have done around 4%-4.5% of total revenue. The way we are going last two to three- year time, we're getting double-digit growth. We are in future also we are expecting the same growth rate sustained. Okay. The margins over there are better than the home market or like how it is? If you like, similar. Similar. Which are the major countries you are exporting to? We are exporting to all these like region we are growing, like Gulf, Oceania region, or even Africa. Even Central America has now showing back on track because during COVID time that was being badly affected. That also is growing now. All markets are good. Okay. All right. Thank you. Thank you. Next question comes from the line of Ankit Kedia from PhillipCapital. 11% realization dropped YOY and quarter-on-quarter. How much is due to price cut and how much is due to mix change or new, you know, you introduced INR 105 chappals also in the market, you know, last quarter? Can you give us that impact of mix versus price cut? No, the lowest price article that you're talking, that is very minimal. It has no any significance. It is just entry barrier kind of an article. Otherwise, whatever price cut we could do on account of fall in our raw material prices, that we have done and that's it. No more price cut. We are competitive and optimistic because we are growing, we are getting our market share back. Sir, in this 11% realization drop, can you quantify how much is due to mix and how much is due to price cut? Very complicated. You know, we have 400 articles, different article, different pricing, different market, material consumption. This is very difficult to quantify because article by thing they are different. Sir, is it fair to assume that the price cut in open footwear could be higher than the price cut in closed footwear, if I have to take on blended basis? Yeah, yeah. Because More polymers are required in open footwear, you know, the EVA and our Hawaii slippers. In sports shoe, upper is a different material, upper and bottom is different material. You are right. In case of sports shoe, price cut was not less. It was almost same. Understood. The reading is the 75% open footwear, we would have taken a double-digit price cut, while in closed footwear, which is around 25%, 30% of our business, we would have not tinkered with the prices much. No, no. Not much. Understood. Sir, my second question is regarding promotions. We have seen higher promotional activity in the quarter in the market. Your competitors also in the month of January, February, March were very active by giving higher dealer commissions, and even retailer commissions. Could you please elaborate, you know, how was our promotion activity in the quarter? Going forward, how are you looking at your A&P spend? We will maintain the A&P spend, you know. See, so in terms of schemes, we always We have like, you know, depends category to category. Hawaii we have different types of schemes. In shoe division we have different types of schemes. Seeing the demand, seeing the market scenario, seeing the pricing, we decide what kind of scheme we have to run. We will see the competition also. We don't benchmark exactly. We see what is our need, and then we give, then we float the scheme. We do not exceed, you know, if competition is giving more, let's give more. We have to analyze other situations also. Sure. What is the A&P target for next year and how much is it for this year, if you can quantify? Like, if you talk about A&P, we do around 8% to 9%, and we are maintaining this from last 2, 3 years. We try to maintain similar pattern in next come, this coming year also. Understood. this include advertisement also, you know, A&P, advertisement and promotion. How much would be pure advertising? Roughly around 4.5%, 4%. Understood, sir. Sir, if you can just share, you know, one of your competitors in, you know, sports shoes is going very aggressive in EBOs. While if I look at your EBO count for last four years has been pretty much flat at, you know, 390 odd EBOs. Why haven't you expanded EBOs in last four years? What is, you know, the risk you see in EBO expansion, which has, you know, while COVID years were also there in two years, but still the expansion has not been compared to the market, where we are seeing competitors expand EBOs? If you can just talk a bit on that. You know, we... You are right that the last two years we didn't expand. We wanted to make it a little more efficient, because we have to control our bottom line also. Our article, 75% open footwear, 25% sports shoe. The competition you are comparing with, they're only shoe outlets. Keeping in view a balance, and the strategy of our retail showroom only to showcase our products. Share of our retail outlet in the total scheme of things is around 8%. All right. Is it fair to assume the margins in EBOs would be just near double digit and lower than the company average? Yes. It's lower than company average, but I think the highest single digit margin we are making, sir, in that category. Understood, sir. Thank you so much, and all the best, sir. Thank you. Next question comes from the line of Manish Poddar from Motilal Oswal AMC. Please go ahead. Yeah, hi. Thanks for taking the call. sir, only three questions. One is, can you help me with primary and secondary numbers for this quarter? Can you repeat again? Can't hear you. Primary and secondary. Primary and secondary numbers, because you are saying that Q1 is still soft, but your volume numbers, when I look at it, 5.2 versus 4.2 of last year or 4.1 of this quarter, last quarter, they seem to be doing decent. I'm just trying to understand what am I missing? Secondary number. Yes. I think it's a volume growth, sir. You are referring the number which you have mentioned in your estimate. Yes. Yes. Volume growth. We sold more open footwear in this quarter and lot of demand was there, so that's why these numbers are very high as compared to earlier quarters. Okay. would that be the case in the base quarter also? Which quarter? Come in. This current quarter, Q1 you are talking about? No, no. I'm just saying when I compare Q4 FY 2022, where you sold INR 4.2 crore pairs versus INR 5.2 crore pairs in this quarter, the mix would be similar, right? This point which you. Yes. This also I think it will sustain. Mix is also similar. You're right, sir. Mix is similar. Yeah. This growth, is it the channel was running low on, you know, Relaxo products given our pricing and now it has stabilized? Is that a function of that or is it a lot of customer offtake also happening? No, no. It is like what we lost market share in Q1, Q2, Q3, now we are regaining that market share. We are getting the space back at shelves, you know. Okay. Shelf space. Okay. The second point is you are also doing pricing parity earlier. Where are we in the journey now? How is pricing across channels for you now? Now we are very competitive. That is why we are able to get back our market shares. Okay. Just one last one. If you could give, let's say for FY 2023 as a whole, just a broad brand-wise split between Sparx, Flite PU, Flite EVA and Relaxo? You know, Sparx is around 40%, Flite is around. 28%. 28%, and rest is our Bahamas and Relaxo brand. Sparx 40, Flite is 28, and the rest is. 38. 38. Flite is Flite is 38. 38. Okay. How much would be Flite PU and EVA in that 38? It's 14 something. you can say, 15, 23, like that. 15, 23. Just one last one in Sparx. Sir, sorry, I didn't catch that number. You were asking, right, the split of EVA and PU. EVA was 15 and PU was 23. Of the 38 is the breakup we are telling. Right. Just one last one. In Sparx, how much was closed in Sparx? Total, you know, close has been around 25%. Yeah. 45%, okay. 45%. Wait. I think the query is within Sparx you are asking? Yeah, within Sparx. Let's say of this INR 2,800 crores you are saying Sparx is roughly 40% of sales? Correct. Roughly INR 1,120 crores. How much is closed in that? closed is 46. 40% is closed and 60% is open in INR 1,000 crores. In this 11... Okay, so it's roughly INR 400 crores. Okay. Okay. INR 450, yeah. Okay, fine. Thank you so much. Thank you. Next question comes from the line of Gaurang Kakkad from Haitong Securities. Please go ahead. Yeah. Hi, sir. congrats on a good recovery in volumes as well as margins. I have two questions. Firstly, can you give the trend in terms of how the EVA prices are currently panning out? What was the Q4 average pricing of EVA for you? No, EB pricing, prices are stabilized. It was around INR 170. That is what. You know, this is at what rate we consume. Although market may be at INR 160 only. This, the current, in the month of April, current quarter that is going on, it is around INR 160, INR 155. It keeps on changing little bit here and there. Okay. last quarter in the base, this would be very high, right? closer to INR 250, INR 300. Okay. Q4 FY 2022. These are INR 250. Okay. Quarter one of this year, past year, in 2022, 2023. Right. Currently the prices are stable at around INR 155, INR 160, which is what the Q4 pricing, average pricing was. Correct. Okay. Okay, fine. Secondly, on the EBO outlet strategy. You have been at those 400 outlets for some time now, and it's heartening to see that there is some plans in terms of expanding that by around like 15% this year. Now, is it that we've got the model right in terms of EBO and now we can target healthy margins in the business? Is it more so given that EBOs are largely Sparx brand focused, so we want to target aggressively and go aggressively on the Sparx brand. What's the strategy out here? you know, naturally, once we are having more efficiency in our stores. We have started expanding this year, and we will continue the momentum the way things are. Okay. Like every year, you will have around 60, 70 store expansion in the EBO going ahead. We hope so. Okay. This high single digit margins largely is sustainable, or we can target to aim more closer to double digit or even a bit higher once it's like fully scaled up and maybe two, three years down the line? I mean, naturally. Down the line things will improve further. We have to be always cautious keeping in view competition, having a competitive pricing. Things will improve because when the sales improve, then efficiencies improve, overheads start getting low. Ultimately, your bottom line improves. Right. Yeah, that's it from me. Thank you. Thank you. Next question comes on the line of Jasdeep Walia from Clockvine Capital. Please go ahead. Hello. Good afternoon, sir. Can you hear me? Yeah. Sir, thanks for giving me this opportunity. My first question is just a clarification on sales of Sparx brand in FY 2023. Last year you had said in FY 2022 fourth quarter call that Sparx is 37.5% of overall sales, which makes the sales of Sparx brand INR 1,000 crore in FY 2022. This year in the opening comment you said it has grown 25%. Sparx brand sales should be INR 1,250 crore this year. In one of the conversation you had with the one of the people who asked questions, you said Sparx brand sales is only INR 1,100 crore. What is the correct number for sales of Sparx brand in FY 2023? Okay. Sparx. No, we have not told you it's a 25% growth. Where? From where you got it? 25% growth, what we said was sports shoes, you know. Only sports shoes. Not Sparx. It is sports shoes. Sparx brand, it covers so many other things. Sandal and open footwear also, SPC. Just That number related to only shoe, closed footwear. Okay. what has been the overall growth in Sparx brand in FY 2023? Overall growth, it's around 10%-12%. 13%. 13% is the overall growth of Sparx category. Put all, put together sandal, shoes, SPC, you know, full made everything under the Sparx branding. Got it. Got it. Sir, I'm assuming 4th quarter is an off-season for Sparx, right? Most of your sales in 4th quarter would be just open footwear sales, right? Correct, correct. fourth quarter is what% of overall sales of Sparx in a typical year? If you did check the figures, 30%. 35%, sorry. 35% in this quarter one. Revenue in quarter one. Q4, sorry. Q4. 35% we had. 35% of Q4 sales is Sparx brand? Correct. Yes. Got it. Got it. Sir, I have a query on your EBOs. You mentioned that, you know, competitors open more EBOs because they open EBOs only for their shoe brand. Why don't you do the same? Why don't you open only Sparx EBOs? You would have the same economics as your competition, right? The economics will be good. Thanks for your suggestion. We'll consider it. Got it. Sir, in the current 400 EBOs, there are no Sparx branded EBOs, right? Only Sparx branded EBOs. No. Far, no. Got it. My last question, sir. What is the composition of your export? Is it only open footwear, or is it Sparx brand? No. Actually, it is more of open footwear. I would say around 60% of our international business comes from Hawaii. Okay. Open footwear, I would say, basic, like Bahamas and, basic natural brands put together. Got it, sir. Got it. Thank you, sir. That's all from my side. Thank you. Next question comes from the line of Gaurav Jogani from Axis Capital. Please go ahead. Thank you for giving me the opportunity, sir. My first question is with regards to, you know, the multiple price cuts over the last two, three quarters that we have seen. Has it led to some kind of, you know, multiple price points at the distributor end? Could this possibly lead to a change in, you know, the town stocking or some kind of inventory level change at the distributor level? You are correct. Like, we had done multiple rounds of price cuts, so they had different types of MRPs, distributors and retailers. Now all of them have been cleared. It took three to six months to, you know, clear all the old MRP products. Now, currently, as for demand, and we have the current prices available in the market, and there's no problem of stocking with the distributors. Currently, they are running short because of the season. There's a peak season. Okay. Okay. Sir, yeah, that was my follow-up question, actually. You know, because of this clearance of the old prices that you have taken in the channel over the past 3-6 months, so could there be a case wherein, you know, because of this activity that you have taken in the past, the base for FY 2024 becomes weaker, and because of which we could see a higher volume growth, for FY 2024 because of that? Yes, yes, you will definitely see that. Okay. Would it be prudent to expect at least 15%-20% kind of a volume growth for FY 2024 in that in that case? We are targeting that currently, yes. Okay. A double digit growth in volume. Oh, okay. Sure. My next question, you know, is with regards to, again, on the pricing part. You know, while we see, you know, prior to the, I mean, the increase in the GST from 5% - 12% in products below INR 1,000. Even if you compare it versus the pre-GST era, I think the taxation on this segment is now higher. How is it impacting, you know, demand at the lower end? Do you think there will be a permanent shift from some of these lower-end footwear to maybe some price, high-priced footwear that you see in the future? It's been one year, you know, since that tax has gone up from 5 - 12, market had adjusted to the new price structure of 12%. Now I think market is comfortable with the new pricing structure and GST structure. We do not see any new player entering because of this or an organizer getting higher. We have taken the correction in prices, and we have regained our, you know, shelf space. Things are fairly stabilized now. Sure. Sir, the third and the last question, you know, is with regards to the overall, the demand patterns that you see in this category. You know, because we are seeing a higher growth in the athleisure segment versus in terms of the open footwear. What kind of strategy the company is doing apart from the Sparx brand that it is running? Is there any another sub-brand that the company is trying to experiment, you know, to introduce more designs, or it will be only basically done through the Sparx brand itself? No. There is no more brand. We are focusing on these brands. Currently our price segmentation has taken place. There's no plan of adding any new branding in the category. Okay. Sir, in terms of the margin structure, you know, if you see, there has been a lot of volatility in the margins over the last three years, if you see. Because on peak levels, you know, on an average, we have gone to 20% kind of EBITDA margins. Even in the bottom, we have touched 10% kind of EBITDA margins. As per you know, what kind of margins are sustainable in the, in the business model that you operate, which is largely a distributor-led model? What kind of margins should one build as a steady-state case for a business like Relaxo? No. Currently we are, I think aiming 15%, 16% current, you know, margin. That thing gets fairly stabilized. We remain competitive. Then, back end efficiencies may adds further. That is wait and see how the things pan out. Yeah. My question was more on, not on the near term, more on a broader and a long-term question, you know. Is this a business wherein, you know, we can target EBITDA margins also near 20%? And the reason I'm asking this question is because, you know, our is a business where we largely focus on price, where the customer is more price conscious. If we try to take the margins a bit higher, is there a case where, you know, you can attract more competition at that point, at that price points? No, definitely we have to be very cautious on this account. We should not just in an ambition to raise EBITDA, and then we start losing market share. We have to always watch all the conditions, all the market scenario, how is our efficiency level, then we have to improve back end efficiencies and become more competitive. At the same time, EBITDA can also improve in that case. Always you have to be, I mean, agile and watch all those conditions to improve. If I summarize or understand it better, I think you will like to keep your margin in a tight range wherein you remain competitive versus the competitors, but at the same time also drive profitability for the business. Yeah. Sure, sir. Thank you, sir. That's all from me. Thank you. Next question comes from the line of Sachit Dwivedi from Prime Capital. Please go ahead. Hi, can you hear me? Yes, we can hear you. Yeah. Okay. Thank you for taking my question. My question is actually, I would say, you know, my first point is almost a complaint, if you will. We are almost a $2.5 billion-$3 billion market cap company, but our engagement with the investors is extremely limited. I mean, We do an earnings call every other quarter, and any attempt to get in touch with the management is basically we don't even get a response. Could we improve this, please? Yeah, we can consider this. Basically, if I reach out, at least will I get a response back? Yeah. Yes, you will get a response. We have IR agency also. You can touch them or you can touch our company secretary. Definitely they will respond. Okay, fine. I will try again. My second question is, a few years ago, I had heard that you are the contract manufacturer for Nike shoes in India. Is that still true? Could you talk about that? That was long back. It was more than 40 years back when we were doing the contract manufacturing for them. Okay. Okay. Okay, fine. My final question is, in terms of price margin and, I mean, we are told that, you know, you can either fix the price or fix the margin. Which one of those do you fix? Or do you fix both and then work on the cost? We have to be mindful of both the things. We have to fix our margin also, and we have to aim for our market penetration and turnover also. Both the things we have to balance out, you know. We can't just look at one thing. Okay. Okay. All right. That's it for me. Thank you. Thank you. Next question comes from the line of Akhil Parekh from Centrum Broking. Please go ahead. Yeah. Thanks for the opportunity. Sir, just continuing on the previous participant's question. Sir, how should we look at Relaxo, right? I mean, pricing has been an issue for us in past as well. In FY 2018, 2019, when one of the larger peers entered into our territory and started undercutting on prices, we couldn't increase our ASP. Like if I look at 2017, 2018 and 2019, the ASPs were largely flattish at around, what, INR 25. In 2023 again we saw similar thing. Should we consider Relaxo as more of a volume plus operating leverage story and less of a branding story? It looks like despite being a large footwear brand, we do not hold the pricing powers. Is that understanding correct? No. You know, last year it was a totally different scenario because of the raw material volatility, not because of any brand problem. When the material that we got at INR 300, and then if it falls to INR 150, and local market was able to get at lower. They got for some time some edge, I mean, competitive edge. Now things are stabilized. That's correct. We had to roll back the prices, right? At least in open footwear, which is 75% of our portfolio. The cost of raw material differs us too much. That was the reason. Okay. Second question is on the price infiltration by the wholesalers. We did get some feedback in the market. You know, the wholesalers were kind of leading to some price infiltration for Relaxo, and we were taking some corrective actions in terms of installing software at the distributor level. Any thoughts on it, and have we done the implementation on the IT part? We have implemented DMS, you know, Distributor Management System. Right now it is the 2nd version. You know, 1st version was implemented 3 years back. Correct. The latest version, 2.0, is out of 700 distributors, 650 distributors, we have implemented 100. It is a continuous process. We are going to increase the implementation, and we are taking steps to control the infiltrations, both in-infiltration by the distributors or wholesalers. It's a continuous process, you know. It cannot stop. We have to really, by help of technology, control this. any timeline or deadline we have, like where we will be done with this complete installation across all 650 distributors? Hello? Ladies and gentlemen, the management line has been disconnected. Please hold while we quickly get them reconnected. Ladies and gentlemen, thank you for being on hold. The management line has been reconnected. Thank you, and over to you. Please go ahead. there is any question from Akhil or sir? Akhil Parekh, please go ahead with the question. Yeah. Sorry. My question was on this deadline. What kind of a deadline we are, you know, planning to install this DMS 2.0 across all our 650 distributors? By this year end, we'll complete this full implementation of DMS 2.2. Whatever complaints we get from distributor or wholesalers, we are taking appropriate actions for this situation. This should kind of create price parity for the wholesaler and the distributor, right? Because of this Correct. Correct. Okay. Last on the capacity and CapEx guidance, if we can. What capacity do we stand at? For FY 2024, what kind of CapEx we are envisioning? That's all from me. Capacity, we already have good capacity. Last year we spent lot of money on the capacity enhancement. This year we don't have any big plan, but definitely routine CapEx, mold, and some repairs and some infrastructure creation that will be there. Already we have good capacity to cater the demand of next two year at least. Yes, in absolute term, like, where do we stand in capacity? Absolute term, we have a capacity of 10 lakh pair, last year being a tough year, so that it was utilization was around 50%-55%. Sure. At company level. Okay, this is helpful and best wishes for coming quarter. Thanks. Thank you. Next question comes to the line of Prerna. Please go ahead. Hi. just wanted to understand the long-term vision. Where do we want to see ourselves in the closed footwear category? In the next five years, how much should be the closed footwear as a% of revenue share? I think, we are thinking of having at least double-digit growth for the next five years. Overall share of shoe business will definitely increase because of the way we see things, growing use of athleisure. It could be maybe, 30% of share of shoes in our scheme of things. Otherwise also, other segment are also important and they are also growing. Okay. Sir, in, if we try to understand the demand scenario in both, open and closed footwear, how would you see whether it is robust or it is a very still muted? Some color on demand outlook that you are witnessing in different regions. You know, we have to keep our products relevant, competitive and value for money to the customer, things will grow. Any category, if we become uncompetitive, demand become muted or it goes negative. Whatever category we are going to be in, we have to be watchful of these things. Okay. currently we, you are saying that our price points are most, all in place to get double-digit growth. Yes. Okay. Sir, what was your capacity utilization in the closed footwear category? Can you repeat the question? What will be your capacity utilization in the closed footwear capacity? Around 60%. Around 60%. Okay. Thank you, sir. I'll come back. Double-digit growth. All the best, sir. Thank you. Next question comes from the line of Mithun Soni from GeeCee Investments. Please go ahead. Hello. I have couple of questions. You indicated, we have three brands and there is a pricing pressure which we may face at the lower end of the price, brand, like Relaxo, the basic chappals. How would you say our pricing, we will have some, relatively we'll have stronger pricing power in terms of to get the pricing from the customer for a brand like Sparx or Hawaii or Bahamas? No, because our brands are quite strong. Okay. Even the old brand like Relaxo is as old as 40 years old. Mm-hmm. At the same time, we have to be mindful that market is competitive and our pricing has to be competitive. We have to sell quality footwear at affordable price. Right. Only you can sell large volumes of product. Correct. That is what we are following. If, can you share, like, for the open footwear, what would be the realization for the, say, a slipper? For, like, how would you... for us, what would be the average realization for open footwear for Sparx versus for Relaxo, sir? Our realization. No, no. You are comparing Sparx slippers with the Relax slippers. They're totally different technology, different things. You can't compare those slippers with this. If you want to know the price, with the Relax, so it will be around INR 100. INR 100. INR 100. Sparx around. INR 450. No, no. The own slippers of, Do you want to know slippers- Yeah, only open footwear. Open footwear. Open footwear. The idea is that what I'm trying to say is that, it's a more aspirational product. Mm-hmm. coming to the next question is that how do we see... Like, Sparx is a much more aspirational product, so what is our now plan for Sparx over the next 4-5 years? One of the participant also asked that we have 400 EBOs. Is there a possibility or a potential that we can rebrand those stores as a Sparx stores, and to really get the mileage for the Sparx as a brand? No, our strategy is not only selling Sparx on those outlets. Our strategy is to showcase all our other articles also. Okay. Sparx is one of the categories. We may consider having only Sparx a few of the stores, not all, because we have to sell or showcase all our categories across- Mm-hmm. Whether it is our Flite brand, Boston brand, Relaxo brand. That's it. Oh, okay. What is your plan for the entire Sparx as a... What is the sort of growth plan we are looking at for Sparx? No, no. We're sitting there under discussion. When we will come out with it, you will automatically know at the time of the conference. Okay, sir. Thank you. Mm-hmm. Thank you. Next question comes from the line of Jasmin Surana from BTG Pactual. Please go ahead. Hi, sir. Thank you so much for taking my question. I had a quick question on our e-commerce channels. What is the contribution we're getting through e-commerce channels? A follow-up on that would be what is our next strategy for D2C channels? currently we are having, 11% contribution coming from, online channels. What is your second question? Is there any specific strategy that we're looking at to scale it up, or what is the trend going to be like in the coming year? Like strategy, we are going to have new channel partners, or we can say the platform. We are going to add new platforms. Currently we work with Myntra, Flipkart and Amazon. We're going to add AJIO and other Tata CLiQ and other platforms also. It's a continuous process of growing the market. We will be selling as brand seller also on these platforms. Okay. Thank you so much. Another question on the exporting country. You said that you're exporting to the Gulf, oceanic countries, Africa and Central America. Would it be possible to get a number on the contribution from each of the countries that we are exporting to? Okay. It was. Countrywise. Countrywise. Very difficult. Very difficult right now because we are exporting to more than 30 countries. Okay. No, the major ones that we're exporting to, would it be possible to get a number? You write Gulf and all. We can tell you the region-wise. Oh, sure. Gulf will be around 30%-35%. We have Central America will be around maybe around 5%-6%. Africa would be around 35%-40% again. We have Oceania, which is a major chunk, rest of the business. Okay. I just wanted to understand since we've seen so much of volatility in the EVA prices in the last year, are there any plans for us to be hedged against those prices in the coming year or so? Because we saw the prices going down to 180, and as sir mentioned, again, the prices have come back to 250, I believe. Is there any plan to be hedged against those? No, no. Raw material prices are fair and stable. Things are quite stable and there's nothing to worry at the moment. I don't know what is your concerns. Okay. Sure. I think, that would be fine. Thank you so much, sir. Okay. Thank you. Before we take the next question, a reminder to all the participants, please restrict yourself to two questions. Next question comes from the line of, an individual investor. Please go ahead. Mr. Abhishek, please go ahead with your question. Hello, can you hear me now? Yeah. Yeah. I have a couple of questions. The first question is it safe to say that we have regained all our lost market share in the previous year and previous quarter, this quarter? Or is it there is some still left to gain back from the unorganized sector? Almost we have covered the loss what we have occurred in Q1 and Q2. Almost, but still we have to gain back, you know. There is a possibility. Possibility is there. We can expect it to go up. Yes, yes. Right. My next question is on the EVA pricing, the EVA prices. Last time, in the last quarter, I remember when I asked this, there were around INR 200 per kg, I think, if I remember correctly. What are the prices looking right now? Do we expect them to fall even further going forward? Do we expect them to rise back to INR 200 levels? Or do we see that there is stabilization now, at least for next couple of quarters? No, it is now around INR 160. Sometimes we get at INR 155, so that's the way. In this range we are getting, INR 150-INR 160. Right. We don't see the prices having any volatile moves going forward? They're more or less stable now? more or less stable. Okay, thanks. My last question is, on the volume growth. What is the volume growth you are targeting for next year, FY 2024? Double digits. All right. When you say double digits, is it like lower teens, like around 11%, 12% or high teens around 19%, 20%? Depends upon the basic article. It could be around 15%. There are other article like sports shoes also. That also we have to see. The average out around it could be double digits is minimum, but we aim to be higher. Okay. it's safe to assume 15%. Yeah. Okay. Yeah. Thank you. Thank you so much and all the best. Thank you. Next question comes from the line of Ankit Kedia from Phillip Capital. Please go ahead. Sir, government is, you know, from 1st of July, talking of introducing BIS in footwear. A lot of your competition is from unorganized market, which impacted your demand now. With BIS being implementing from July 1st, how do you see unorganized markets play? Do you think market share regained for organized players like you, will be higher in open footwear? While imports could also be tough in the sports footwear category from 1st of July, there could be inventory disruptions for importers. In Sparx also we could see some market share gains. You know, for the time being, this quality control standard specifications have been laid out, and there is possibility that this date is going to be extended because, you know, government is not ready. Meanwhile, lot of clarifications are required from our side, and we have raised the queries to BIS. Accordingly, we are internally, whatever quality specification they have laid down, whatever it is in the making, we are already meeting those standards. Nothing to worry. I agree, nothing to worry, will you gain share because your competitors might not be ready and you might be ready, it will be beneficial for you? Do you think if those standards are laid out immediately and you can gain share? No, you know, because there is a small exemption for micro and small. The companies whose turnover is up to INR 50 crores, there will be exemption. They will have their still space in the market. Understood. Understood. Thank you so much, sir. Thank you. Ladies and gentlemen, that was the last question for today. We have reached the end of question and answer session. I would now like to hand the conference over to the management for closing comments. Thank you all for joining the call. This is all from our side. Looking forward to joining you again. Thank you very much. Thank you. Thank you. On behalf of Elara Securities Private Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.